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The Informational Role of Bond Analysts

Gus De Franco

University of Toronto - Rotman School of Management

Florin P. Vasvari

London Business School

Regina Wittenberg Moerman

University of Southern California

July 5, 2009

Journal of Accounting Research, Forthcoming

This study uses a large sample of sell-side bond analysts’ reports to examine the properties of recommendations provided by bond analysts and the impact of these recommendations on bond securities. First, we document that the distribution of bond analysts’ buy, hold, and sell recommendations is skewed positively, but less so than the distribution of equity analysts’ recommendations. The positive skewness in bond analysts’ recommendations is greater for low than for high credit quality bonds. Second, we find that bond analysts’ reports generate bond trading and return reactions that are both economically significant and greater for low credit quality bonds. The bond market reaction is greater for bond analysts’ reports than for equity analysts’ reports. Finally, while both bond and equity analysts lead rating agency announcements, we find no evidence of a difference in timeliness between bond and equity analysts’ reports. Overall, our results are consistent with bond analysts issuing more negative reports than equity analysts and providing more information about low credit quality bonds as a result of the asymmetric demand for negative information by bond investors.

Number of Pages in PDF File: 55

Keywords: bond analysts reports, bond analysts recommendations, bond market reactions

JEL Classification: G29, G33, G12

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Date posted: March 20, 2008 ; Last revised: July 13, 2009

Suggested Citation

De Franco, Gus and Vasvari, Florin P. and Wittenberg Moerman, Regina, The Informational Role of Bond Analysts (July 5, 2009). Journal of Accounting Research, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1432501

Contact Information

Gus De Franco
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6
Florin P. Vasvari (Contact Author)
London Business School ( email )
Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
Regina Wittenberg Moerman
University of Southern California ( email )
Los Angeles, CA 90089
United States
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References:  96
Citations:  10

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